Saturday, June 26, 2010

Risks of Combining Banking and Private Equity

INSEAD's Lily Fang and Harvard's Josh Lerner and Victoria Ivashina have a new working paper that examines the impact of combining banking and private equity. According to their paper:

"Between 1983 and 2009, bank-affiliated private equity groups accounted for over a quarter of all private equity investments. Banks' involvement increases during peaks of the private equity cycles. In particular, deals done by bank-affiliated groups are financed at significantly better terms than other deals when the parent bank is part of the lending syndicate, especially during market peaks. Investments made by bank-affiliated groups have slightly worse outcomes than non-affiliated investments, despite the targets having superior performance prior to investments. Investments during market peaks by commercial banks have significantly higher rates of bankruptcy."

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Michael Roberto

The Great Courses

About Me

I am the Trustee Professor of Management at Bryant University in Smithfield, RI. I joined the faculty after serving for six years on the faculty at Harvard Business School.

My research, teaching, and consulting focuses on leadership, with a particular emphasis on decision-making and teams. I have published two books based upon my research: Why Great Leaders Don't Take Yes For An Answer (2nd edition to be released in May 2013), and Know What You Don't Know (2009).